Start a home inspection business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your home inspection business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a home inspection business?
Obtaining training and certification is one of the initial costs, and obtaining a business license is another. Home Inspection insurance is also a crucial startup cost, since customers will be advised to hire inspectors who carry it for the protection of both parties. Other startup costs include a dependable vehicle and some basic office and inspection equipment. Essential office equipment includes a computer capable of running home inspection software, telephone, fax, color copier, and a quality digital camera. You’ll also need a desk, chairs, and shelving as well as report binders and business cards. Basic inspection tools include ladders ($200-$500) and testing equipment such gas and moisture detectors, circuit tester and a voltage “sniffer”, and an infrared thermometer. You’ll also need some basic tools such as screwdrivers and pliers. Depending on whether your equipment is new or used, startup costs can range from $10,000 to $30,000.
What are the ongoing expenses for a home inspection business?
Ongoing expenses for a home inspection business include:
- Maintaining a business license and professional liability insurance
- Office supplies
- Vehicle and equipment maintenance
- Continuing education
Who is the target market?
Preferred customers are homebuyers, real estate agents, and mortgage lenders.
How does a home inspection business make money?
A home inspection business makes money by charging clients for their time, experience and expertise in discovering potentially costly damage as well as any safety hazards in homes for sale, thereby saving homebuyers money.
How much can you charge customers?
The cost of a home inspection depends on the size and complexity of the structure or structures to be inspected. Fees range from $200 to $470, with an average of approximately $325. A separate termite inspection typically costs $300, while an inspection for the presence of radon gas averages $750. The more training and equipment your home inspection business has, the more earning opportunities it will have also.
How much profit can a home inspection business make?
Annual income for home inspectors, depending upon education and experience, ranges between $26,000 and $66,000, with an average of $45,000. Unlike other types of businesses, people own their homes for an average of eight years, which means that any repeat business is unlikely to come from clients, though it may come through recommendations from real estate agents or mortgage lenders.
How can you make your business more profitable?
One way to make your business more profitable is by advertising how much money your services are saving your clients. Home inspections are routinely used as a contingency in purchase offers, which means that your services can result in your clients being able to back out of a contract with no financial penalty. A home inspection is a money- saving investment. By acquiring vital information about the condition of a home, your clients can save thousands of dollars by making a counter-offer that takes needed repairs into consideration.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your home inspection business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state business permits or licenses may be needed to go into business as Home Inspector. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Home Inspector Licensing
Home Inspector Licensing is generally regulated by having pre-license learning requirements that vary state to state. While some states do not require prerequisites for receiving a Home Inspector License, it is a process that many states are trying to legislate due to requests from realtors and homebuyers. Additionally, becoming AHIT certified will increase the competitiveness of a home inspector where there is still no state requirement. Here is a state-by-state map of Home Inspection Licensing requirements.
Home Inspection Businesses should require clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms, conditions and service level expectations. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your home inspection business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a home inspection business
One of the best ways to promote your business is by attending events such as open houses where you can network with realtors and potential home buyers. Leaving your business card with local residential construction companies is also an effective way to gain an edge over the competition.
How to keep customers coming back
In this business, licensing requirements vary from state to state. That fact, coupled with the high level of personal trust required, is one reason that word of mouth is the most important element of any advertising campaign. Satisfied customers who have saved money and have been able to increase the level of safety for themselves and their families as a result of your services speak louder than words on a flyer.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Home Inspection Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is ideal for those who want to increase home safety by educating homebuyers about any potential dangers or future expenses.
What happens during a typical day at a home inspection business?
Daily activities performed by the owners of this type of business include:
- Scheduling appointments with clients
- Exterior inspection of walls, foundation, grading, drainage, garage, and roof
- Interior inspection of plumbing, electrical, heating, air conditioning and ventilation systems
- Fire safety inspection of water heater and all appliances
- Communicating with clients, real estate agents, and bank representatives
- Compiling detailed written reports of all findings
- Recommending repairs and/or more in-depth inspections by experts
- Sales and marketing
- Filing and archiving
What are some skills and experiences that will help you build a successful home inspection business?
Skills essential for success in this business include:
- Technical knowledge that encompasses a thorough understanding all house systems as well as insulation. A basic education designed specifically for this business is available through many community colleges or even online courses.
- Verbal communication skills to discuss key findings with clients.
- Report writing and basic photography skills for purposes of illustration. Detailed reports establish credibility and minimize liability in the event of a dispute and home buyers depend on them to receive financing and/or insurance approval.
- Business and marketing skills to supplement there is a higher reliance on word of mouth advertising because a satisfied customer speaks much more clearly than a constructed advertisement for the service.
What is the growth potential for a home inspection business?
Some home inspection businesses have become successful enough to offer franchise opportunities. The benefits of franchises include assistance in obtaining insurance, reporting tools, ready-made contracts, continuing education opportunities and mentoring by a network of experienced professionals.
TRUiC's YouTube Channel
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a home inspection business?
Seasoned professionals advise becoming a member of organizations such as ASHI and NSHI, the National Society of Home Inspectors. They also advise learning about real estate practices, building codes, and construction trends through workshops, courses, and talking frequently with others in the industry. Taking advantage of the expertise of successful, experiences home inspectors is one of the best ways to achieve your own success in this type of business. It’s also advisable to take courses in accounting and business contract law.
How and when to build a team
While you may perform inspections alone, it’s important to build a team from the beginning. It may take some time to build up your business to the point where you are able to hire employees. However, your team will consist of the professionals you recommend to your clients for the correction or repair of any problems or unsafe conditions you find during the course of your inspection. Your customers will appreciate your knowledge of the quality of work of local professionals.